Lease extension on a Clinton Well

I have acreage in the western part of Guernsey County in Ohio.  A portion of that acreage has a Clinton well operated by Artex Enegy.  The lease that governs that well granted rights only to the base of the Clinton formation.  The well itself has had no production since 2006.  In an effort to clean up title on my holdings, I wrote to Artex asking them to to surrender the lease and plug the well since no production had occurred since 2006 and no delay rentals had been received over that same period. A land agent for Artex recently contacted me asking if I would grant a 9 month extension to the lease.  He explained that it has been their intention for some time to enter and rework the well but they had gotten sidetracked.  They are convinced new oil production would be acheived should they be granted the right to rework the well.  Being skepitical of their premise, what would they gain by reworking the well, acheiving some type of measurable production, and thus holding the acreage (from the surface to the base of the Clinton Sands) indefinetely?  Is it simply to defer the costs of plugging the well?  Are there other shallower formations that the operators are coveting?  I might add that the area where this well is located within my holdings would be the best location,given location and ease of entrance, for a utica well to be located.  This was one of the reasons I wanted that well to be plugged.

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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on September 26, 2012 at 3:50pm

If you have the ability to lease your deep rights then extending the Clinton well shouldn't hurt your big payout potential.  If Artex is serious about reworking the well then I'd say you have little to lose.  New production means a royalty in your pocket and no impediment to your deep rights.  Tell them you'll extend the lease for six months and you want a 17% royalty on any new production.  See what they say.

Permalink Reply by arminius on September 26, 2012 at 4:38pm

After having spent the better part of the last year curing title issues, I am now ready to lease the deep rights on my acreage.  However, much of the leasing activity in the western portion of Guernsey County has stalled.  My acreage lies within what some have called the "volatile light oil" portion of the Utica play.  The viability of this portion has yet to be tested/derisked.  As for Artex, I will keep your strategy in mind.

Permalink Reply by Summer Johnston on September 27, 2012 at 2:41am

I'd be careful. They might decide to drill through the existing wellhead if you grant the extension. If the well has been nonproducing since 2006, they had nearly 7 years to come in and "re-work" the well--but didn't. If you grant the extension, you might be doing yourself out of a signing bonus.

Permalink Reply by JR on September 27, 2012 at 3:30am
I think they're trying to HBP your land. Something's fishy. Get a lawyer and don't sign A THING until you fully understand the ramifications. It took me 9 months to figure out our clinton lease with a small driller. A simple title search and two attorneys missed significant information about our deep rights situation. I think they know something they're not telling you.

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